9 Reasons Why You Should NOT Retire Early

I totally disagree.

9 Reasons Why You Should NOT Retire Early

According to a federal analysis, the COVID pandemic forced 3 million more Americans than usual to retire early. The US is currently struggling with unprecedented labor shortages, and it seems that younger workers aren’t to blame, but aging ones. Experts say that the number of older workers leaving the workforce early is growing, which pretty much affects the country’s economy.

And while the economy’s situation may do little to persuade aging workers to stay in their jobs for a bit longer, consider this: It becomes increasingly evident that retiring early doesn’t always mean a few more years of traveling, fishing, margaritas on the beach, and golf.

From your happiness and health to financial burdens, consider the risks before deciding to retire early, especially as the cost of living increases due to inflation.

Here are 9 reasons why you shouldn’t retire early!

1. Market Downturns Are Inevitable

True, but I pulled out at a decent level and bought payout annuities, they'll be paying me for at least 35 years.

A report from the University of Michigan showed just how much the 2008 recession and the market downturn it brought affected older Americans, who are extremely vulnerable to financial instability.

Experts say that downturns are inevitable and cyclical, and even if the next one won’t be as catastrophic as the Great Recession, a crisis that coincides with your decision to retire early could erase a huge chunk of your savings with almost no warning signs, as it did for millions of people starting in 2008.

While the younger workers have time to cope with the crash and wait for it to rebound, the older ones don’t. Seniors can find themselves struggling to live their golden years on a tight budget.

2. Your Social Security Benefits Will Be Smaller

I used the annuities to delay taking SS  until age 67. By waiting until the January after full retirement age you get the most bump in your payments. Retired at age 62, second best decision I ever made. The first was this: 

Why my stroke was the best thing to ever happen to me

 

Do you want to retire early? Well, the sooner you start claiming your Social Security checks, the lower your benefits will be. For instance, if you were born in 1960 or later and you start receiving your retirement benefits at age 62, the earliest age at which you qualify for Social Security, your monthly benefits will be reduced by 30% compared to if you wait until your full retirement age. Also known as the normal retirement age or FRA, it varies depending on the year you were born.

For those born in 1960 or afterward, the FRA is 67. In other words, if you decide to retire early, you’ll get smaller checks. Postpone claiming your Social Security, and for each year you do that from age 67 to 70, you’ll get an extra 8% in your monthly check. After age 70, there are no benefits to delaying.

3. It Could Affect Your Health

My health was being destroyed by work, flying out on Monday morning, flying back Thursday night, washing clothes on Friday, putting them back into the suitcase and doing it all over again for weeks at a time. Traveled about 25-30 weeks a year, very little self care could take place and zero social connections.

According to a 2008 analysis conducted by the National Bureau of Economic Research, retirement leads to impairments in mobility and mental health. It also increases the risk of other poor health outcomes, such as stroke and cardiovascular disease.

Moreover, some data shows that those who retire early tend to struggle with more physical and mental issues than those who extend their working years. For instance, there are 40% more cases of depression among retirees, while diagnosed physical conditions increase by a full 60%.

While health issues are inevitable as we age, it’s important to note that seniors who remained socially connected and physically active were less likely to have any ill effects.

4. Your Nest Egg Will Have To Last Longer

Precisely why I bought annuities to limit this risk. The risk is now on the insurance companies shoulders, not mine. Insurance companies do have a compact with each other to backstop any failed company.

Let’s say you decide to retire early at 62. If you live to 90, your individual retirement accounts and other savings will have to last for about 28 years. However, if you retire at age 72 and live for the same period of time, your nest egg will only have to cover you for 20 years.

Working longer also translates into more years in which you can contribute to a 401(k) or other retirement plans and more time for you to earn interest, but this won’t happen if you retire early.

According to Stephen J. Taddie, a financial expert, a great way to estimate your retire-ability is to multiply your estimated draw on investment portfolios that will boost your Social Security and other sources by 25.

If you have that much money in those combined accounts, you should be fine retiring early. If you’re close to it, think twice. And don’t expect that living will be less expensive, either. Most seniors believe their expenses will decline during retirement, but in most cases, this isn’t the case.

5. You’ll Need To Find Health Insurance

My last company had a age plus years of service greater than 65 and you could get retiree health. As soon as I found that out I retired.

Medicare is one of the most popular national programs in history—and for very good reasons. The majority of retirees rely on it to cover the majority of their healthcare needs. Except for a few conditions, you don’t qualify for Medicare until you’re 65.

This means that you’ll have to pay for both health insurance and any medical needs out of your own pocket until you’re eligible for Medicare. But wait until you learn this: Insurance premiums can even be triple what you’re used to paying while working. That’s because there will be no company footing most of the bill for your health insurance.

And there’s one more thing here: as you age, healthcare costs are expected to skyrocket. Think about this as well before deciding to retire early.

6. You May Miss Working

Never, my last job and the previous one turned out to be losuy places to work.

You may say this won’t happen as you can’t wait to retire early and do all the things you haven’t done while working. However, there’s a chance you may miss working.

In fact, many retirees struggle to get used to the transition from the daily schedule of a full-time job to the unstructured lifestyle of retirement. You may even miss your former colleagues and your boss and yearn to return.

If you decide to retire early just because you don’t want to work anymore, make sure your finances allow you to do that. Leaving the workforce and wanting to go back isn’t easy, which sends us to the next reason why you shouldn’t do that.

7. You’ll Want to Return to Work—Only to Discover That You Can’t

Nope, not ever, I'm way to busy with living, social connections and travel to have time for work.

According to a 2012 report by the US Government Accountability Office, people over 55 usually need more time to find new jobs compared to their younger counterparts.

The Harvard Business Review data seems to agree with that, noting that those who are most affected are older women. In other words, re-entering the workforce after a break is much harder for aging people than for younger people.

That’s a difficult pill to swallow for those who decide to retire early without realizing that the door may close forever once they quit. In fact, data shows that roughly 30% of retirees would want to go back to work if they could.

8. You’ll Miss Out on Crucial Catch-Up Years

Not needed, I've been planning for retirement since my first job in my 20's.

Not all saving years are created equal. You may wonder what this exactly means. Well, people tend to make more money as they advance in their careers. Moreover, aging Americans have less financial burden when their children finish college or their mortgages are paid.

That usually coincides with the time the IRS’ catch-up contribution rules kick in. Retirement accounts get favorable tax treatment, so there’s a maximum on how much you can contribute each year.

When you hit 50, the IRS extends those limits by thousands of dollars per year, depending on your account type. If you retire early, you miss the chance to save as much money as possible using tax-privileged accounts during what are probably your prime earning years.

9. It Could Kill You

Not likely, I'm exercising a lot more and there is much joy in life. 

If you’ve recently made the decision to retire early, don’t panic. In fact, congratulations—you’ve done something that many folks dream of but never actually do.

The truth, however, is that those who work past 65 live the longest. Studies discovered that working just a single year after 65 significantly reduces the risk of all causes of death, even when health, lifestyle, and demographic issues are considered.

To be fair, lots of factors are at play, including the fact that the data pool includes some people who left the workforce involuntarily because they were too unhealthy to keep working. But even still, the link between early death and early retirement is striking.